Fed cattle in Southern Alberta were trading in the range of $85 to $87 in mid- July; down nearly $10/cwt from the highs earlier in spring. Market ready-steers in Nebraska were trading at $93/cwt on a live basis and $148/cwt on a dressed basis. Wholesale values appear to be coming off the seasonal lows earlier in summer. Choice product continues to hover at $155/cwt which is up about $20 in comparison to June of 2009. This is rather surprising because retail values are about the same to slightly lower in comparison to year-ago levels, depending on the product category. It is also important to note that casual dining and fine dining during the second quarter of 2010 were down three to five per cent from last year due to lower consumer expenditures. Therefore, we have a change in the market structure where more value is floating to the producer versus the retailer or restaurant owner.
Cattle on feed in Alberta and Saskatchewan as of June 1 were 933,746 head, up a marginal eight percent over June 1 of 2010. May placements were 114,293 head, down eight per cent from last year. This is the first time in 2010 that placements were below year-ago levels and this is due to the larger export program of feeder cattle in April and May. U. S. demand cleaned up excessive numbers and the market will now contend with below year ago feeder cattle numbers for the remainder of 2010. Fed-cattle marketings in May were 179,000 head, up 17 per cent over May of 2009. This was slightly larger than anticipated. The larger export program of slaughter cattle along with stronger domestic demand helped carcass weights drop below year-ago levels. Adverse wet weather also caused feedlots to liquidate cattle slightly sooner than normal.
Canadian slaughter cattle exports to the U. S. from January to May were 471,000 head, compared to 485,000 head in 2009. Over the past two months, slaughter exports have exceeded year-ago levels and we expect this trend to continue through July and August. The year to date domestic slaughter for the week ending June 5 was 1.368 million head, up 4.2 per cent from 1.313 million head for the same period last year. The domestic market has slaughtered about 70,000 more cattle than last year due to larger export demand for beef products, particularly to U. S. and Southeast Asia.
U. S. cattle on feed as of June 1 were 10.494 million head, up one percent over last year and marginally higher in comparison to May 1 of 2010. Placements were a whopping 2.022 million head, up 23 per cent over last year while marketings were down four per cent. It is important to note that cattle on feed 120 days or longer were down 10 per cent from last year.
U. S. consumer confidence dropped to 52.9 in June, down from 62.7 in May adding to the view that the economic recover is stalling. High-paying jobs are hard to find and with little improvement on the nearby horizon, people are looking to conserve every penny. Household spending has turned sluggish since April. U. S. non-farm payrolls dropped by 125,000 in June, which is the largest drop since October of 2009. The U. S. unemployment rate dropped to 9.5 per cent as many people left the labor force. Underemployment continues to hover just under 20 per cent due to the large number of people unemployed eight months or longer. Canadian demand appears to be exceeding expectations as unemployment dropped below to 7.9 per cent in June, the lowest level over the past year. Consumer expenditures have recovered in Canada but not in the U. S. Canada is still very dependent on the U. S. for cattle and beef exports; therefore, our prices are still tied very closely to what happens south of the border.
The fed and feeder cattle markets appear to have stabilized after coming of the spring highs. Looking forward, the fall period can be negative for the stock market and overall economy which will temper domestic consumption. The market is expected to stay relatively flat at this time. However, the economic recovery should continue in the first quarter of 2010 at which time on feed numbers will also be down sharply. Lower calf crops resulting in lower feedlot placements and contracting beef production should result in firmer prices for fed and feeder cattle in February and March of 2010.
GeraldKlassenanalysescattleandhogmarkets inWinnipegandalsomaintainsaninterest inthefamilyfeedlotinSouthernAlberta.For commentsorspeakingengagements,hecanbe reachedat [email protected] or2042878268.